Last year’s headlines were filled with announcements of major new insider trading prosecutions. The DOJ and SEC have promised there will be more such cases to come in 2010, including through the use of more aggressive investigative techniques such as wiretaps and wired informants. The question is what can a firm practically do to stop insider trading, and if the risk of improper trading cannot be entirely eliminated, how to protect the firm and its constituencies?

Most responsible firms of sufficient size — hedge funds, investment advisors, broker-dealers and banks — have adopted and implemented written policies and procedures that are fairly standard. These written policies are helpful in educating people about the bright lines, but, as typical policies candidly recognize, they cannot cover every situation. In today’s world — which reflects an exponential expansion of the sources of information, as well as the means and speed of communication and the webs of relationships among trading professionals, consultants, advisors and corporate insiders — situations can arise where the lines are less than bright.

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